Sramana Mitra: You kind of need a tribe of people who think the same way. If you want to work on interesting problems, but necessarily unicorn ideas, then you need other people around in the ecosystem who think like that instead of trying to force feed these kinds of ventures into the more traditional venture world, which operates in a very different way.
Between the 70,000 odd seed investments and about 1,200 series A investments, there is a huge series A gap that gets created. Unless you surround yourself with like-minded investors, it will be very difficult to mitigate the Series A gap, right?
Amir Banifatemi: That’s a very accurate observation. There is a crunch on this Series A and not all companies will go there. What I was saying is that the initial intent and focus on very pragmatic problems will further help increase the value of the company moving forward. Some of them may not go anywhere. Some of them may go somewhere.
Many for the first year do not pursue their venture and some of them pursue nothing until the second year. I was answering a response to your question about investing in companies that could exit for $5 million or $10 million only. The answer is yes because we see more opportunities for growth in pursuing real problems that have a pragmatic scope and not trying to become a unicorn.
It would eventually go back much bigger than when you start on paper saying I want to solve a problem that is worth $1 billion. It might not happen necessarily and the ecosystem support happens today. We see more participation. There are a lot of cryptocurrencies and smart contracts. Crowd-funding has helped many get support from a larger support base more than just VC.
We see phenomena that would probably support a more distributed ecosystem. It’s not going to be a very consistent ecosystem, but we see more and more support in cities like Paris and London. I saw that in Norway too. There is a global international committee, now trying to lend a hand whether with providing resources or money or anything to make an interesting project see life. This is where more angels need to focus. Venture capital cannot have that focus. Venture capital have very precise definitions and modus operandi. As angels or smaller funds, I think we can be a bit flexible in looking at companies that may not look big at the beginning but with small amount of injection of capital, could go very far. I think this is success in the same way.
Sramana Mitra: I think these are successes. If you put in $1 or $2 million and sell the company for $10 million to $15 million, I consider it a success. Even if you put in $250,000 or $500,000 and sell it for $5 million to $10 million, I think it’s a success at a different scale. But excess is not a requirement for success as far as I’m concerned.
Amir Banifatemi: Yes, I make this comparison with the TED talk. If you can give a TED talk in front of this 50-people audience or 5,000-people audience, in the end if the TED talk has a lot of views, nobody knows how many people were sitting in the audience when the TED talk happened. So success is success.
Sramana Mitra: One thing to keep in mind if you are playing the game of small capital-efficient startups and early exit is that, you do need to be close to at least a set of acquirers who are interested in the domains that you are interested in or you are investing in. How do you view that?
Amir Banifatemi: You’re absolutely correct. It could happen by accident, but acquisition happens with some planning. We have a very strong focus on certain technologies and certain ways to build products. We’ll look at a lot of product-market fit initially. We get involved with companies.
We work with every company at least once a week – if not twice. We make ourselves available for their business development, for their patenting, and for everything else. All this attention that we put in makes us very prepared in terms of having our eyes and antennas open on who can be the potential partners, competitors, and acquirers.
We don’t do medical device investment because we’re so much focused on the domains of data science, robotics, and AI in general. We navigate into circles, in areas where we try to understand what the market will require. That proximity will help us properly identify potential acquirers.
Sramana Mitra: You are mindful about those bridges.
Amir Banifatemi: We are.
Sramana Mitra: Talk about a couple of your investments that you are particularly proud of that you think are emblematic of what’s happening in the universe right now. Why do you like them?
Amir Banifatemi: A good question. We have invested in a lot of companies. Some of them didn’t make it. Some are what we call in between. They have something going on but not exiting. We have a few exits that we are proud of. One of them was Connectifier, which is in Orange County.
The metaphor I’m using is like Google Analytics for human resources. How can it identify who’s working where and how can you find the best talent somewhere? This company, after 2 and a half years, got acquired by LinkedIn which in turn got acquired by Microsoft. The problem that they were solving was a very specific question of talent seekers. How would I know who’s available for exactly the job I want to fill?
Unfortunately the people who are putting themselves up for the job may not always be the ideal candidate. How can we identify hidden talent? Basically, they built an engine which could identify based on social conversations, public conferences, publishing, etc. It could score on different topics and identify someone in hospitality, travel or healthcare and has done product launches and knows how to manage a team under stress.
How can I find that person? Basically, they will identify the book of individuals that actually were all working. Not all are looking for a job and are not looking. It works so well that head hunters and hiring companies were buying licenses. It was becoming so obvious for LinkedIn that this is something that they would benefit a lot from. They had way more than $15 million exit and now are basically being deployed through LinkedIn and Microsoft.